On July 28, 2004, the Alaska Oil and Gas Conservation Commission (“Commission”) received correspondence from BP Exploration (Alaska) Inc. (“BPXA”), dated July 27, 2004, requesting an exception to statewide spacing requirements for drilling and operation of Milne Point Unit (“MPU”) I-19L1. On August 18, 2004, the Commission received additional supporting information from BPXA concerning MPU I-19L1. This horizontal, multilateral well bore will originate from the MPU I-19 production well. In MPU I-19L1, the top of the productive interval will lie 2,023 feet from the south line and 4,497 feet from the east line of Section 28, T13N, R10E, Umiat Meridian (“UM”). The bottom hole location will be 5,260 feet from the south line and 1,487 feet from the east line of Section 29, T13N, R10E, UM.

The top of the productive interval in this well bore will lie within state lease ADL 025906, and the total depth of the well bore will lie in state lease ADL 025517. MPU I-19L1 will open the Schrader Bluff Oil Pool (“pool”) to production, and will approach within approximately 200 feet of existing well MPU J-09A, which is open to the same reservoir sand within the pool. The operator reports MPU J-09A no longer communicates with the reservoir due to sand plugging, and it is not feasible to return the well to regular production. MPU J-19L1 is designed to access the same reserves as MPU J-09A. MPU I-19L1 will also approach within 500 feet of state leases ADL 025515 and ADL 025516.

Well spacing in the pool within Sections 28 and 29 of T13N, R10E, UM is regulated by Rule 2 of Conservation Order 477 (“CO 477”), which supersedes the statewide spacing requirements of 20 AAC 25.055. An exception to the spacing requirements of CO 477, Rule 2 is required as MPU I-19L1 will open the pool within two of the same governmental quarter-quarter-quarter sections as existing well MPU J-09A.

Rule 11 of CO 477 states: “Unless notice and public hearing is otherwise required, the Commission may administratively waive the requirements of any rule stated above or administratively amend any rule as long as the change does not promote waste or jeopardize correlative rights, is based on sound engineering and geoscience principles, and will not result in an increased risk of fluid movement into freshwater.” Administrative approval is appropriate for an exception to the well spacing requirements specified in CO 477. Notice and public hearing are not required for this spacing exception as MPU I-19L1 will not jeopardize correlative rights. The affected state leases, ADL 025906 and ADL 025517, and adjacent state leases ADL 025515 and ADL 025516 have the same owners and landowners, and they are committed to the MPU and to the Schrader Bluff Participating Area (“SBPA”). MPU I-19L1 will lie more than 500 feet from the exterior boundaries of the MPU and the SBPA.

The Commission has determined drilling and operation of MPU I-19L1 production well bore will not promote waste or jeopardize correlative rights, is based on sound engineering and geoscience principles, and will not result in an increased risk of fluid movement into freshwater. The Commission hereby approves the drilling and operation of the Milne Point Unit I-19L1 well bore as proposed.